Benchmarks manage to keep head above water

Indian equity benchmarks somehow managed to keep their head above water and went home with slender gains on Friday. Though, markets started the session on optimistic note with report that capital markets regulator, the Securities and Exchange Board of India (Sebi) has proposed compulsory physical settlement in stock derivatives contracts and has sought comments from market participants in a discussion paper, as it is concerned over the suitability of derivatives for retail investors. Soon after the start, optimism got fizzled out and key gauges traded in very tight band, swinging between green and red for most part of the day. Traders turned cautious on report that Sebi imposed an Rs 2,423 crore penalty on PACL and its four directors for illegal fund mobilisation through various schemes that were used by the group to garner over Rs 49,000 crore from the public.

Buying in dying hour of trade helped markets to settle slightly in green, as some support came with private report that emerging as a significant source of investments into capital markets, Employees Provident Fund Organisation (EPFO) is likely to pump in Rs 25,000-30,000 crore in equities in 2017-18 with Rs 5,700 crore already invested this year so far. The report added that National Pension Scheme (NPS) is also among the sources for driving the domestic flow surge, which has been positive for the past 17 months. Traders also get some comfort with a joint report by Ficci and Deloitte which stated that Indian retail industry, growing at 10 percent, may almost double to Rs 85 trillion (lakh crore) by 2021 steered by consumer data and technology disruptions.

On the global front, European counters were trading in red in early deals amid ECB President Mario Draghi’s suggestion that it may begin tapering its massive stimulus programme this autumn continued to underpin the euro. Manufacturing production in the UK rose more than forecast in July, bolstering optimism over the British economy. Asian markets closed mixed, supported by solid Chinese trade data. China’s trade balance data came in at a surplus of $41.99 billion, narrower than the $48.6 billion expected for August.

Back home, investors took note of former RBI Governor Raghuram Rajan’s statement that India needs to focus on three areas -- infrastructure, power and exports -- to stimulate GDP growth, which has been hit by factors like demonetization. Meanwhile, Reserve Bank of India deputy governor Viral Acharya suggested that deposit franchise of state run banks which are in the intensive care unit be sold off to private sector banks as the time may be running out for state-run banks to clean-up their balance sheets and recapitalize.

On the sectoral front, most of auto stocks were under pressure ahead of GST Council meet with respect to cess hike on SUVs and luxury cars. The GST Council, chaired by Union Finance Minister Arun Jaitley and his state counterparts, will decide the quantum of cess hike in each variety of car in its meeting on September 9. The government has already notified hike in GST cess on a range of cars from mid-size to luxury variants to a maximum of 25%, from the earlier 15%.Steel stocks edged higher despite Trump administration’s statement that it will initiate new anti-dumping and countervailing duty probe to determine whether imports of stainless steel flanges from India and China are being dumped in the US.

Finally, the BSE Sensex rose 24.78 points or 0.08% to 31,687.52, while the CNX Nifty was up by 4.90 points or 0.05% to 9,934.80.

The BSE Sensex touched a high and a low of 31,763.70 and 31,619.00, respectively and there were 11 stocks on gaining side as against 20 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index shed 0.44%, while Small cap index was down by 0.08%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.88%, Industrials up by 0.73%, FMCG up by 0.46%, Telecom up by 0.39% and Bankex was up by 0.03%, while Realty down by 1.54%, PSU down by 1.01%, Healthcare down by 0.92%, Power down by 0.90% and Oil & Gas was down by 0.57% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 4.07%, Bharti Airtel up by 1.65%, Kotak Mahindra Bank up by 1.22%, HDFC Bank up by 0.98% and ITC up by 0.78%. On the flip side, Mahindra & Mahindra down by 3.29%, Dr. Reddy’s Lab down by 2.93%, Sun Pharma down by 1.87%, Bajaj Auto down by 1.76% and Infosys down by 1.25% were the top losers.

Meanwhile, in order to augment domestic supplies ahead of the festive season, the government has allowed import of 3 lakh tonnes of raw sugar at concessional duty of 25 percent. In the month of July this year, the government had increased import duty on sugar from 40 percent to 50 percent to restrict cheap inward shipments and maintain domestic prices.

Sugar production in India is estimated to decline to around 21 million tonnes (MT) in 2016-17 season ending September from 25 MT in the previous year, while the annual demand is 24-25 MT. In April this year, the Central government allowed duty free import of raw sugar up-to 5 lakh tonnes to boost domestic supplies and check price rise amid production fall.  Earlier, the government had imposed stock limit on sugar mills for the next two months in a bid to keep sugar prices under control during the festive season.

As per the government’s notification, by the end of September, a mill cannot keep more than 21 percent of its total sugar availability for the entire 2016- 17 marketing year and a factory cannot hold more than 8 percent at the end of October. At present, sugar is being sold at an average price of Rs 42 per kg in most retail markets in the country, while branded sweetener is available at Rs 50 per kg. In the international market, white sugar prices have fallen by 8 percent since July and trend seems downward. Also, the domestic wholesale price of sugar are flat.

The CNX Nifty traded in a range of 9,963.60 and 9,913.30. There were 17 stocks in green as against 34 stocks in red on the index.

The top gainers on Nifty were Larsen & Toubro up by 3.77%, Bharti Airtel up by 1.47%, Tech Mahindra up by 1.16%, Vedanta up by 1.13% and Kotak Mahindra Bank up by 1.08%. On the flip side, Mahindra & Mahindra down by 3.36%, Dr. Reddy’s Lab down by 2.87%, BPCL down by 2.08%, Sun Pharma down by 2.07% and Bank of Baroda down by 2.04% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 30.74 points or 0.42% to 7,366.24, France’s CAC shed 13.34 points or 0.26% to 5,101.28 and Germany’s DAX was down by 11.52 points or 0.09% to 12,285.11.

Asian equity markets ended mixed on Friday on worries about the damage from Hurricane Irma in the US, as well as lingering fears about ballistic missile launches and nuclear weapons in North Korea. The US dollar weakened after the European Central Bank chief Mario Draghi indicated that the future of the bank's massive stimulus program may be decided in October. The ECB kept interest rates unchanged and also confirmed that its net asset purchases of 60 billion euros a month would continue until the end of December, or beyond, if necessary. Japanese shares ended lower as investors digested a raft of local economic data, including Japan's second-quarter GDP figures that were revised downwards. In addition, a stronger yen weighed on exporters' shares. Meanwhile, Chinese shares slipped to snap a three-week winning streak, as defensive consumers stepped back from a rally, although there were signs investors are pumping fresh money into a market buoyed by solid economic growth and a resurgent Yuan. August trade data showed China's exports rose 5.5 percent from a year earlier, which were in line with expectations but slower than July, while imports grew 13.3 percent, beating market forecasts.